Fair Pint: Cut pubco power
A new campaign group wants action to reduce the power of pubcos after the Office of Fair Trading rejected calls for a new probe.
What powers does the Office of Fair Trading (OFT) have to act against pubcos?
The OFT can order the Competition Commission (CC) to investigate companies or market sectors that it believes act in an uncompetitive way. The CC investigates and can order firms to make changes.
Has the OFT been asked to investigate pub ownership in the past?
Yes, most recently in 2002 the Federation of Small Businesses (FSB) asked for a probe into the beer tie. The FSB believed tenants paid too much for beer and rent and received inadequate support from pubcos.
It asked whether pubco/tenant agreements were anti-competitive and if companies abused their dominant position.
The OFT said no — as they had in evidence to the Trade & In-dustry Select Committee Inquiry (TISC) into pubcos in 2004, and most recently in a letter to Liberal Democrat MP Tim Farron.
Who wants action against pubcos now and why?
Leading the charge is the Fair Pint campaign group, which is believed to be backed by a wealthy benafactor.
It has support from Farron and fellow Lib Dem MP Greg Mulholland. Fair Pint’s steering group includes accountant Brain Jacobs — who gave evidence to TISC — Freedom for Pubs Association founder Mike Bell and surveyor David Morgan of Cookseys DMP.
Two London-based pubco tenants — Mark Dodds of the Sun & Doves and Steve Corbett of the George Canning, both in Camberwell — are also included. They argue that the 1989 Beer Orders failed to increase competition and concentrated pub ownership in the hands of pubcos, who are able to charge too much for rent and beer.
Pubcos have failed to adopt many of TISC’s recommendations, they say, including keeping rents sustainable, scrapping the machine tie and having transparent rent reviews.
These views are reflected in an Early Day Motion — a petition for MPs — from Farron that has been signed by 21 MPs to date. The current trading conditions — in which four pubs are closing per day — have triggered the action.
What does the Fair Pint campaign want?
1) The tie removed from all pubs, except pubs owned by breweries with up to 500 sites.
2) The Business and Enterprise
Committee to review whether the recommendations from TISC have been adopted.
3) The voluntary recommendations of TISC to be made mandatory.
4) If necessary, the Department for Business, Enterprise & Regulatory Reform (BERR) should refer the tie and rent process to the CC.
5) MPs to support Farron’s EDM.
What reasons does the OFT give for not acting?
The OFT says a 2004 update to the Competition Act excludes so-called “land agreements” — relating to interest in land, such as rent for commercial properties. The exclusion can be withdrawn if the OFT believes it leads to market distortion — not currently the case with pubcos, says the OFT.
The OFT cites European rules — the EC Block Exemption Regulation for Vertical Agreements — to argue that tied leases don’t breach competition law so long as a supplier doesn’t have more than 30% of the market and there are no “hardcore” restrictions like price fixing.
Finally, the OFT says no one company has more than 15% of pub ownership so it’s “unlikely” that an individual pubco would be dominant in the market — 40% is the usual threshold.
What is Fair Pint’s response?
The OFT should be concerned because the tied tenant is worse off than if he were free-of-tie. This is because when added together, rent on a tied lease and price of drinks from pubcos costs more than a free-of-tie rent on the open market.
Pubcos operate a “restrictive practice” because if pubs bought beer directly from suppliers they would pay less — and the higher price of drinks isn’t compensated by lower rent. The OFT should also be concerned that pubcos failed to adopt recommendations of TISC, crucially that pubcos “lack transparency” in dealings with tenants.
Will the BERR act?
A spokesman for the department played down the likelihood of action: “There is nothing for us to add to what the OFT has already said. If there are anti-competitive practices they are a matter for the independent competition authorities to look into.”
What happens now?
The Fair Pint campaign has written to the OFT outlining its concerns. The group is also writing to every MP urging support for Farron’s EDM. It has hired PR and lobbying firm Connect Public Affairs to help.
Connect has previously worked with scores of companies, public bodies and campaigners, from Tesco and Ford to the Wine & Spirit Trade Association, police forces and trade unions. Watch this space for further developments.
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